China must embrace slower growth and bolder political reform to keep its economy from faltering and to spread wealth more evenly, Premier Wen Jiabao said on Wednesday, vowing to use his last year in power to attack mounting discontent that he warned could end in chaos.
Wen pledged to make growth more resilient to external pressures, deflate domestic property and inflation risks and deal with 10.7 trillion yuan ($1.7 trillion) in debt racked up by local governments, while also promoting political change. "Reform has reached a critical stage. Without the success of political reform, economic reforms cannot be carried out. The results that we have achieved may be lost," the 69-year old Wen told reporters at the end of China's annual meeting of parliament, the National People's Congress (NPC), over which he has presided for a decade.
Wen has stood out among China's leaders as the most vocal advocate of measured relaxation under party control. As he prepares to leave power, he has made a habit of calling more forcefully - though vaguely - for political reform. He retires next year along with President Hu Jintao after a decade in power which has seen China grow to become the world's second-biggest economy, but which is likely to see 2012 deliver the slowest rate of annual growth during their leadership.
Wen, who was once an aide to purged reformist party chief Zhao Ziyang, also gave an unusually blunt prognosis about the risks to growth and stability posed by China's political system, even warning that failure to act could rekindle the chaos of Mao Zedong's Cultural Revolution.
"A historical tragedy like the Cultural Revolution could occur again," he said. "Each party member and cadre should feel a sense of urgency." During Mao Zedong's era of fervent Communism, Wen's father and grandfather, both teachers, were among the victims of party campaigns to demote citizens deemed to have bad "class" backgrounds or suspect pasts.
Wen opened the annual parliamentary session over a week ago by announcing a cut to China's economic growth target to 7.5 percent for 2012 from the 8 percent eyed in each of the previous eight years, saying it necessary to help transform the economy. "Due to the European debt crisis and a shrinking external market, there are downward pressures on the Chinese economy. Under such circumstances, we lowered the growth rate target mainly to allow for structural adjustment," Wen said.
"We will step-up exchange rate reforms," he promised, adding that recent activity in Hong Kong currency derivatives markets signalled the value of the yuan "is possibly near an equilibrium level". China de-pegged the yuan from the dollar in a landmark move in July 2005 and it has since appreciated some 30 percent against the US currency, though some critics in the West say Beijing still keeps too tight a grip on the yuan to make exports cheaper.
Over a three-hour press conference, Wen flagged that he does not want to be a lame duck in his last 12 months as premier, spelling out a package of goals to addressing yawning income disparities and public dismay over soaring housing prices. Social harmony is an obsession of the Communist Party leadership, which justifies its one-party grip on power with the promise of stability and prosperity for the country's 1.3 billion people, most of whom are very poor.
China's economic ascent has increasingly concentrated riches in the hands of an urban elite, despite Wen's pledge to improve the livelihoods of poor farmers and rural migrants to cities. "Economic development has also produced unfair distribution, a lack of trust, graft and other problems," Wen said. There is already a long to-do list of reforms in the 12th five year plan, laid out by Wen last year and approved by the NPC, which sets China's overall policy direction for 2011-2015.